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Next success for Gazprom: Moncrief has to post almost two million Euro as security for costs of legal proceedings

12 November 2009

November 12, 2009 – In the litigation initiated by U.S. company Moncrief International, Inc. Gazprom has gained another victory. By interim judgment, the Regional Court of Berlin requested Moncrief Oil International (Deutschland) GmbH, a company formed by Moncrief solely for the purpose of litigation in Germany, to post security in the amount of 1,813,985.58 Euro for the Gazprom litigation costs. Mayer Brown LLP represents Gazprom in this multi-billion dollar lawsuit of Moncrief.

With this decision, for the first time, the Regional Court of Berlin has requested a German company to post security for litigation costs of the defendant. Under German law, only companies having their domicile outside of the European Union are required to post security. The interim judgment cannot be challenged separately.

As early as 2005 Moncrief had filed a suit in a Texas district court against Gazprom, Wintershall and Ruhrgas, a subsidiary of German-based oil and gas company E.ON because it was excluded from the exploitation of the Jushno-Russkoje gas field in Siberia. The U.S. court dismissed the complaint for lack of jurisdiction.

Moncrief then initiated a lawsuit at the Regional Court of Frankenthal against BASF and Wintershall in which it requested compensation for damages of approximately 8.5 billion US $. Moncrief claimed that BASF and Wintershall had agreed to jointly exploit the gas field with Gazprom and to exclude Moncrief. Moncrief claimed that it had entered into a respective contract with a Gazprom subsidiary years ago. In these proceedings, the Texas company had to post security for the costs of litigation in the amount of 1,374,000 Euro each to BASF and Wintershall. The Regional Court of Frankenthal dismissed the multi-billion dollar law suit against the German companies in 2007 citing that the claims had no legal foundation.

Shortly after dismissal of this complaint Moncrief founded a German company, Moncrief Oil International (Deutschland) GmbH, and assigned its (alleged) claims against Gazprom to this GmbH with the aim of suing Gazprom directly without having to post security for the costs of litigation. The Regional Court of Berlin rejected this attempt. It held that, by forming a German company, Moncrief had gained a mere formal legal position. Its attempt to avoid having to post security for the costs of litigation was qualified as circumvention of the relevant procedural provisions. The Court ruled that this abuse of legal rights by Gazprom was inadmissible.

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